What changes have you seen in the distribution business?
Probably one of the biggest changes I’ve seen in the distribution business has been the consolidation, with a number of acquisitions reducing the number of distributors out there.
Another big change has been how products have become progressively more commoditised. Look at projectors, for example, which have long been a staple of the Midwich business. Once upon a time they were high value, a specialist product sold by specialist resellers and integrators, and they needed real technical expertise to set up and maintain. Now, a consumer can go in to a branch of PC World, take a projector home and set it up himself.
It’s not just projectors – there are many products that have followed a similar trajectory. One of the challenges for a business like Midwich is how you react to that – how you can embrace commoditisation, while simultaneously looking for ways to add value.
A by-product of that commoditisation, of course, has been the reduction in price – and the erosion of margins. That, in turn, has led distributors, in many cases, to become more specialist, more vertically aligned, because that’s where the opportunity lies to maintain and improve margins: it’s become very tough to be only a broad line distributor of commodity products.
One of the things that’s transformed the industry is the whole concept of electronic trading. The internet gives us – gives everyone – access to many more products than we once could have dreamed of, and setting up a business arrangement is much, much easier.
What do you see as Midwich’s strengths?
For us, a key element of our business – a core element – is to be strong operationally, and to ensure that our business processes are scalable. We pride ourselves on being the number one distributor for the brands we represent. We have significant buying power, and that allows us to hold better levels of stock, and to price very competitively. When people talk about adding value as a distributor, it’s easy to overlook the fact that, for many resellers and integrators, the ready availability of stock – at competitive prices – is value that they’re looking for.
That’s what I call the ‘transactional’ side of our business: providing resellers and integrators with the products they want on short lead times and at attractive prices. It’s fundamental to our business.
However, over the past three or four years, we’ve acquired many different companies, which now form new divisions of Midwich. Ubiqz, our new security division, is a great example. We knew that many of our resellers and integrators would be visiting customers who could use what Ubiqz offered. It was an opportunity for them to add value to their solutions, to differentiate themselves – and to increase their sales. We could bring economies of scale to the opportunity – and use the in-house expertise that existed within Ubiqz to develop the business. It was a win-win for us, for our customers and for their customers.
Another example of this is True Colours Distribution, the technical AV solutions division of Midwich. What they offered was complementary to our existing business – but allowed us to offer more value. Both Ubiqz and True Colours are examples of how we’re creating more systems-driven business to go alongside our classic distribution business. Our customers like it, because it opens new doors for them – and we have the expertise to help them make the most of the new opportunities. Our acquisitions have been very well received by our customer base.
On what basis do you decide which products to carry?
Our product selection strategy is based on the concept of needing to offer our customers a choice. To return to projectors: we carry thirteen brands in total. You might think that carrying so many brands would put manufacturers off – but it doesn’t. They see the breadth of our customer base – and that’s attractive to them. They can see our track record in terms of numbers of sales. They see our installer customer base. They see how we invest in people, and how we dedicate a sales specialist to each brand we carry, so that we have the expertise to appropriately support a brand.
It’s always open to any manufacturer to change the status quo – and we’re always open to products that bring something new to the table. Take the Casio projectors that we added last year, for example. Casio were first to market with projectors that didn’t use mercury lamps, giving them a lower cost of ownership, while at the same time being an environmentally superior solution. We’ve been delighted at how well received those have been – they’ve been a real star product for us and exceeded our expectations; they resonate with the way our customers and their customers are thinking.
How do you see the future?
We’ve just had the best June in terms of sales that we’ve had since the company started 30 years ago, and we’ve had a couple of fantastic years, so there’s plenty to be excited about – not least because, for many of our acquisitions, it’s still early days. There’s still plenty of potential to be unlocked there.
One of the things that interests me is whether we’ll ever see the likes of Tesco and Amazon moving into the space that AV distributors have traditionally considered to be their own. Suppose companies like those, with their infrastructure and resources, started to get into a business-to-business mode? What would that look like? We have to be aware of what’s going on around us, think through what might happen – and ensure that we stay ahead of the game.
The key for us is that we have to keep innovating, keep moving forward. We’re seeing really good signs – but we know that we need to keep doing what we do even better. There’s still plenty to do.